This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2019/10/22/business/dealbook/wework-softbank.html

The article has changed 10 times. There is an RSS feed of changes available.

Version 4 Version 5
WeWork, Rejected by Wall Street, Accepts Lifeline From SoftBank WeWork, Rejected by Wall Street, Accepts Lifeline From SoftBank
(about 3 hours later)
WeWork has agreed to be taken over by its largest outside investor, SoftBank, two people with knowledge of the matter said, in a deal that ends weeks of uncertainty for the troubled shared office space company. WeWork has agreed to be taken over by its largest outside investor, SoftBank, three people with knowledge of the matter said, in a deal that provides a lifeline for the troubled shared office space company after it pulled its initial public offering and removed its chief executive.
SoftBank had invested about $10.5 billion in WeWork; it will now have to pour billions more into the company, cut costs and stabilize the business. SoftBank, which has invested about $10.5 billion in WeWork, will now offer to lend the company $5 billion and buy up to $3 billion in shares from other investors, these people said. Once the deal closes, SoftBank will need to quickly cut costs and stabilize the business.
The sale marks a humbling moment for WeWork. It values the company at just under $8 billion, compared to the $47 billion that SoftBank reckoned it was worth in January, people with knowledge of the bid said on Monday. The sale marks a humbling moment for WeWork and SoftBank. It values the company at just $7 billion, down from the $47 billion that SoftBank reckoned it was worth in January, these people said.
Not long ago, WeWork had been seeking to sell shares to stock investors to keep funding its growth. But that initial public offering was scrapped last month after Wall Street investors balked at its huge losses and unusual corporate governance structure. Just a few weeks earlier, WeWork had been planning to sell shares to stock investors in what its investment banks had billed as one of the biggest initial public offerings in recent years. But that share sale was scrapped last month after Wall Street investors balked at the company’s huge losses and unusual corporate governance structure.
In addition to the takeover offer from SoftBank, WeWork’s board had also been considering a $5 billion debt financing offer from JPMorgan Chase. WeWork’s board chose the SoftBank deal over a $5 billion debt financing offer from JPMorgan Chase.
The SoftBank deal will mean a huge payout for Adam Neumann, WeWork’s co-founder who stepped down as chief executive last month. Under Mr. Neumann, the company grew at a breakneck pace, drawing ardent backers like SoftBank’s chief executive, Masayoshi Son, and making Mr. Neumann wealthy. The SoftBank deal will mean a possible huge payout for Adam Neumann, WeWork’s co-founder who stepped down as chief executive last month, under pressure from shareholders — including SoftBank — who grew skeptical of his leadership as the I.P.O. started falling apart.
But prospective investors for the company’s initial offering were skeptical of his leadership, and existing WeWork backers — including SoftBank — pushed for his ouster. Mr. Neumann will receive a short-term loan of $500 million to repay a credit line from JPMorgan, Credit Suisse and UBS that is secured by his shares in WeWork, which have dropped significantly in value.
Yet Mr. Neumann will receive roughly $1.7 billion in consideration as part of the SoftBank deal, according to the people with knowledge of the offer. The Tokyo-based technology giant will buy roughly $1 billion worth of WeWork shares from him, and give him about $500 million worth of financing to repay a credit line from JPMorgan. Mr. Neumann also will receive a $185 million consulting fee. Like other WeWork shareholders, Mr. Neumann will be able to sell shares to SoftBank but must use the proceeds to immediately pay off the $500 million loan, the people said. Mr. Neumann owns about 30 percent of the company and could sell up to $1 billion in shares to SoftBank. Once the deal is complete, SoftBank will own about 80 percent of WeWork.
In exchange, he will back the SoftBank deal and step down from WeWork’s board. Mr. Neumann will also give up special shares that gave him control of the company, back the deal, leave the WeWork board and become a consultant to SoftBank for four years, these people said. SoftBank will pay him $185 million for his advice, and Mr. Neumann will be barred from starting another company or poaching employees from WeWork.
As part of the agreement, SoftBank will accelerate a $1.5 billion investment in WeWork that it had planned to make next year, and it will help assemble a $5 billion loan from a consortium of financial institutions, including itself. In addition, SoftBank will loan WeWork $5 billion at the same interest rate that SoftBank typically pays its lenders, these people said. And SoftBank intends to appoint its chief operating officer, Marcelo Claure, as the executive chairman of WeWork.
Given how much it has already invested in WeWork, Softbank’s takeover will only be successful if the company is eventually sold or goes public at a valuation of $15 billion or more, these people said.
WeWork is not the only SoftBank-backed company to run into trouble. SoftBank, led by Masayoshi Son, and its $100 billion Vision Fund have also poured money into Uber and Slack, whose stock prices tumbled after they started trading on the stock market several months ago.WeWork is not the only SoftBank-backed company to run into trouble. SoftBank, led by Masayoshi Son, and its $100 billion Vision Fund have also poured money into Uber and Slack, whose stock prices tumbled after they started trading on the stock market several months ago.
The Wall Street Journal previously reported the terms of the WeWork-SoftBank deal. A WeWork spokeswoman did not respond to requests for comment.
The Wall Street Journal previously reported some of the terms of the WeWork-SoftBank deal.
This is a developing story and will be updated.This is a developing story and will be updated.